Kinetic modeling of wealth distribution with saving propensity, earnings growth and Matthew effect

Abstract

Abstract A kinetic model is presented for a closed economic market with random transactions involving the saving interest, earnings growth, and Matthew principle. Furthermore, the deviation (overlap) degree is defined to quantify the dissimilarity (similarity) between two arbitrary wealth distributions. It is interesting to find that the tendency of the entropy is similar to that of the particular overlap degree which measures the coincidence between the monetary distribution and the Boltzmann-Gibbs exponential function. In addition, both the Gini coefficient and Kolkata index decrease with increasing saving propensity, which helps to enhance wealth equality by raising the middle-class population and reducing the proportion of the rich and the poor. However, the economic profit and Matthew effect contribute to dispersion in the wealth distribution and exacerbate wealth inequality.